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The future of mobile signatures

Dan Puterbaugh, Director of Strategic Development for Adobe, is an expert of mobile signatures. Speaking recently at an ESRA event, he laid out the future of how we as consumers will sign documents and authorizations.

He opened by saying: “I think a lot of times when I talk to people in the US, they ask, ‘Why? Why would you do a presentation on this? There’s not a lot of complexity there.’”

He continued: “But I want to talk about it because of the EU. In 2016, the EU passed a new electronic signature law that allowed remote signatures and for the first time gave a specific type of signature the exact same legal status as a handwritten one. The US law says that if you need a signature, you can use an electronic one, but it doesn’t explicitly say that a particular type of electronic signature will have the same status as a handwritten one.

“That’s causing a shift in status in the EU that could impact everyone. A lot of companies do business in the EU. But even if you’re operating only on North America, what’s happening in the EU is interesting because if you remember a few years ago, we were using regular credit cards while the EU had switched to smart cards with the embedded chip. And I think the US took the attitude that it wasn’t needed and was too expensive. But what happened was because of the additional security and because of all the data breaches involving credit cards, the US moved to that.

“So I think there’s something like that coming for North America because there’s a highly secure form of electronic signature that’s becoming more prevalent in the EU.”

Three categories of e-signatures

Puterbaugh explained the three types of electronic signatures.

Standard electronic signatures: Those are the ones everyone knows.

Advanced electronic signatures: They are what are usually called digital signatures: an electronic signature married to an authenticating digital certificate.

Qualified electronic signatures: They have two special characteristics: Every member state must recognize a qualified e-signature from another state, and qualified e-signatures are given the same status as a handwritten one.

Puterbaugh explained: “The issue is that using these signatures with digital certificates is an enormous hassle. I had thought it was like pre-check, where you go somewhere secure and someone checks everything out, but in the EU it often involves getting in your car, going to a drugstore like a Walgreens, handing a bunch of forms to someone who was barely trained in this, and having that person put the forms in a big stack of paperwork that will eventually go somewhere.

“That has been seen as a real barrier. I was recently in the EU and the European Commission is very concerned about that.”

He continued: “The other painful thing is that, once you have the digital certificates, they’re very painful to use. People have smart card readers and USB keys that they carry around. They’re physical forms of the digital certificate, but the problem is that you’re not going to be executing digital signatures in the field on a smartphone. You have to go back to your office.

“I was at a conference in the EU where we were talking about this and a guy told me he was a lawyer in Italy., He said he has a safe with USB keys for eight of his managing directors. Once a week, he has to insert each USB key and put in a PIN to sign documents on their behalf.

“This is like dealing with printers, which haven’t evolved since 1994. Digital certificates were developed during another era and they’re alien to how we do business today.”

Solving the pain points

Puterbaugh said: “But we’re starting to see these pain points solved, thanks to smartphones and the cloud. They’re coming together to solve the authentication and execution problems. This is important because it could drive adoption in the US and the rest of the world.

“Regarding authentication: What we’re starting to see is a form of video authentication that is a person-to-person process where you, through your laptop or smartphone, go into an encrypted chat with someone and go through a series of steps to prove who you are. It’s much better than having to drive to the drugstore.

“Many companies are offering this. It’s similar to e-notary. It’s a slam dunk way of authenticating someone’s identity, as long as you do it properly. I always say something is a trend if someone, especially Germans, want to regulate it. The German regulatory body has promulgated a set of guidelines around this. There are videos about it on YouTube that are worthwhile viewing.”

He continued: “The person doing the interview has training in forged IDs. You have to get explicit consent because it will all be recorded. It has to be done in real time, without interruption. There are guidelines to check for artifacts and other things to trick people. Many IDs in the EU have holograms and other watermark technology that you can only see when they’re in motion. You can’t replicate that process with a photo – there are many ways that still images can be forged.

“An interesting thing about it is what I call ‘the dance.’ If I’m doing this authentication, not only will I have someone show me their ID and show me all corners of it, as well as let me hear their voice, but to ensure that the other person is a real person occupying the same space, I have them block part of their face, block part of their ID, and so forth.

“They then require two-factor authentication. The entire video is passed on to someone else to authenticate it. The whole process takes three to five minutes to get a digital certificate.”

Executing the certificate

Puterbaugh then said: “When it comes to executing the certificate, the element that was handled by smart card readers and USB keys is now handled by the cloud. There are a number of different standards being developed around it. Specifically, ETSI (European Telecommunication Standards Institute) is developing a standard that talks about how you’re going to go about developing a standard for executing an advanced but remote qualified e-signature. It isn’t finalized yet, but it’s inevitable.

“What we’re driving toward in the EU is an idealized world where you have something that’s relatively easy to use that you can execute off your smartphone but satisfy the most white-knuckled compliance officer that you’re trying to talk into allowing you to use e-signatures. There’s always been this back-and-forth between something that’s easy to use and something that’s hyper-secure. Now we can have both.

“The timeframe for this is the next few years. There are companies doing it and standards being developed.”

Q&A

 There was one question: “Do you see this style of frameworks coming to North America any time in the near future?”

Puterbaugh replied: “That assumes the US government can legislate anything, but I would say that having talked to a number of people in other jurisdictions, such as India and Japan, they are looking at the EU law as the model they might want to adopt. Likely it will be a matter of if you want to do business outside the US, you will need to know about this. If not today, soon.”

The slow-but-inevitable digital revolution of the life insurance industry

There’s an urgency to that movement, but it’s still a slowly unfolding process.

The participants were:

  • Rich Grisham, AVP of Sales for iPipeline
  • America Sass, Director of Business and E-Commerce Development, Mutual of Omaha
  • Alan Bett, AVP of Business Tranformation, John Hancock Insurance

 Grisham opened the proceedings with a quick history of the life insurance industry. “It was conceived just over 300 years ago,” he said, “and became what we know it as today in the 19th century. During the 19th and 20th centuries, several powerful companies started selling life insurance products to people, often with lucrative results.

“Around 30 years ago, the tide turned against the industry. According to the Wall Street Journal, there’s been a 40% drop in the number of individual life insurance policies sold in the United States. Was the industry disrupted and we didn’t even know it? Some would say that the industry literally created the concept of data analytics, with entire companies basing their existences on actuarial data. In many cases, those worked very well but now the industry is asking itself tough questions.

“The industry has in some ways been left behind by the digital revolution. And now it’s changing before our eyes. When I ask myself how people want to buy life insurance in the year 2017, they want to buy it the way they buy everything else: digitally and by authenticating themselves with a selfie or a thumb print. Unfortunately, most people still have to get life insurance with needles and blood. That mismatch of expectations has caused a lot of problems.”

How far are we from being able to put my thumb on a phone and asking for life insurance offers?

“I think we’re pretty close to that,” Bett responded. “When you think of life insurance, you can get it today without providing any medical evidence. That’s been the way for quite a while. Ed McMahon used to sell it on TV – it was guaranteed, but it didn’t cover much.

“The key thing is that we need to be able to assess risk while giving you value and coverage for what you need. So we have to ask a lot of questions. So what’s growing in the industry is the use of public databases, social media, and other things we know about you, whether you give us your approval or not. We can typically give you a large policy based on your buying habits, what you do, who you associate with, and so forth.”

Why is the idea of using a thumb print to get millions of dollars of coverage a pipe dream?

“I don’t think it is,” Sass responded. “We have a lot of experience with what we call ‘low face’ policies that consumers can buy in an Amazon-like manner. They’ve come to expect that. I would say that the challenge that a life insurance company faces is that consumers don’t know how to buy life insurance.

“The numbers we see that are increasing or decreasing for life insurance companies are due to lack of knowledge. This is not the type of commodity product that a consumer does a lot of research on and knows exactly when to buy it. They still need advisers and other trusted people to help them. There’s an expectation of electronic processes but consumers aren’t there yet.

“We’re also facing a lot of discussion about fraud from within. It comes from consumers who don’t want to take a selfie because then you’ll figure out they need oxygen or they’re not really 150 pounds. Consumers want to get around that. They feel like life insurance companies are out to get them, and trusted advisers are coaching them to get around that. Because of that, electronic processes aren’t always going to be accepted.

“But we are trying those processes for very simple products that are very low risk, where you don’t have to provide a lot of data about yourself. So we need to educate the public about when, how, and why they need life insurance.”

Why is the life insurance industry different from all others? Why haven’t we represented ourselves digitally like other industries?

Sass responded: “Typically, the most successful companies have been around for over 100 years. Our systems at Mutual of Omaha are from the 60s and 70s, so updating them is very costly. We need to prioritize which ones to update and when.”

She added: “When I talk about usage, it’s the question of where we spend money on what consumers find attractive and want to use electronically. We have to think about experimentation, so that’s what holds us back as a large insurance company. The adopters of the processes are the ones who will lead us to solutions we build for consumers.”

Why has the life insurance industry been resistant to change?

Bett responded: “I don’t think we’ve been resistant to change. We’ve been slow to change. We are in the risk assessment business, so we have to fulfill promises for people, which makes us risk-averse to things like moving to digital systems. We have to ask ourselves what failure looks like versus success, so that’s ingrained in us and has to change.

“The scope of what John Hancock offers means that we can’t do it all at once, so we have to pick our spots. One of the key factors is the way we sell it. Most of our sales still come from independent agents and brokers. Direct to consumer channels are growing, but when the demographics of your agents are on the older side, they are somewhat resistant to change too. One of the things driving us to transform is that our distribution partners are demanding we do, so we’re worried about keeping them happy too.”

What does it mean to transform to digital?

Bett replied: “One of the things about analytics is that, yes, we have analytics that help us with actuarials, but all that analysis is for our internal consumption. We’re starting to use the big data we have to do the analytics outwardly, to understand what consumers want, how we reach them, and how we asses risk. We’re all hiring people from outside the insurance industry to do that. It’s about being tactical in investments.”

Sass added: “It’s challenging. What it means for us is that we’re experimenting. We’re hiring innovation experts and data scientists, as well as looking at the sales process and considering an omni-channel experience for consumers. We have to think about moving in and out of channels. When we think about setting up processes to support that, it becomes expensive quickly.

“A lot of our processes are digital on the front end but still manual on the back end, until we can prove out the business case and invest in it. When we look at the future for us, it’s about thinking about the next thing, so we started with what we needed to do to attract consumers and agents into the process and learn from it so we can build the right digital processes.

“A lot of futuristic things are coming for us with robotics. So how can we build a digital front end and let robotics tie us back into the back end systems? We need to un-cripple ourselves and look innovative to consumers, who don’t view the insurance industry that way. Even if we have the best app out there, they don’t think of our industry that way.”

What has been the lynchpin to get the industry moving?

 Sass replied: “Our distribution partners that pull the majority of the business for us today, like agents or direct marketers who are advertising on TV or radio, Those partners are requiring that we digitize so these processes are as fast as possible. They’re selling the need for the product, but when the consumer is sold on it, they expect immediate gratification and they know they have a product they paid for.

“Consumer expectations are starting to become a lynch pin, but it’s still really early. They’re not expecting a digital process. For us, we have over 60% of our business in a lot of product lines is electronic, but consumers aren’t starting the process. It’s agents and others on the phone with the consumer.

“Another lynchpin is companies that are entrants in the market that are tied to very traditional companies like us. Haven Life is an example. To the consumer, they seem like a new, innovative company, but when you look at the back end, they’re tied to historic companies like ours. But they’re changing the mindset of consumers.”

Bett added: “What’s interesting is that as we try to invest in more innovative sales channels, such as direct to consumers, or they find us and call us, is that most transactions don’t complete digitally. They drop out and go to a call center. It’s still an advice-driven industry. They’re not sure what they’re buying.

“If you look at banks and brokerages like E-Trade, it’s so easy to use that stuff. We’re painted with that brush. We have to respond to that and have been following their lead.

“In addition, look at the under-insured market. That’s because there’s a massive middle market that has no insurance at all. They don’t need complex policies worth millions of dollars. They just need something simple to protect what they have, and the only way to get to that is through digital means.”

What are some of the best examples of the transformation to digital?

 Bett responded: “Two things come to mind. I was involved in a project in Canada called Quick Issue Term where the only way you could apply for this policy is through digital means. There’s no paper at all. Being involved in that, we had to simplify the process and do it all digitally without human intervention. It really transformed the way we thought. It didn’t sell that well, but it changed how we think about things in the Canadian market.

“The other thing is John Hancock Vitality, a wellness program that gives people an Apple Watch and has them participate in the policy and get a discounted premium based on the food you buy, how often you go to the gym, your heart rate, and so forth. And you communicate with us on a regular basis through electronic means.”

Sass added: “The success we’ve seen has been in simple processes. The most success we’ve had is in voice sales because consumers need some help to get through the process. Voice sales are the easiest for us, so if you think about an e-sign process, a voice signature is the most successful. The consumer hears what they’re buying, they buy insurance, and they walk away with something. It’s been very successful for us.

“We’ve found that where we started was e-mail e-sign, where the consumer has to click into their email and click into the document to sign it, but they don’t use it. If you think about a millennial, I know for certain they avoid email, so that process doesn’t work. So the key is understanding how consumers expect to buy. You have to look at every step along the way.”